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The Dutch pension system is built on three pillars:
- State pension (AOW) The first pillar is the Dutch government's state pension scheme. Everyone living or working in the Netherlands builds up this pension under the General Old Age Pensions Act (Algemene Ouderdomswet – AOW). Everyone currently working in the Netherlands contributes to the AOW state pension scheme. When the scheme was introduced, everyone received an AOW pension from the age of 65. Now that the statutory retirement age is gradually being increased, this differs from person to person.
- Employment-related pension Most employees build up a supplementary pension through their employer. Both the employer and the employee contribute to this pension, which is usually administered by a pension fund. The pension fund invests the contributions received from employers and employees in e.g. equity, real estate and bonds and uses the accumulated assets to pay out pension benefits in the future. A pension fund is managed by a board in which both employers and employees are represented
- Individual supplementary pension Some people also build up an individual supplementary pension in addition to their AOW pension and – if applicable – their pension built up through an employer. They can do this for example through life insurance or a bank saving scheme. People can use their individual supplementary pension for early retirement or to supplement their state or employment-related pension. Self-employed persons often build up a pension in this way.
Role of DNB
We are the supervisory authority for pension funds, and we mainly play a role in the second pillar. Our aim is to safeguard the interests of all pension fund members. To do so, we monitor the following aspects:
- Financial position Do pension funds have a sound financial position and do they follow the statutory rules when increasing or decreasing pension benefits? A pension fund's funding ratio and the actuarial interest rate are important in this respect.Do pension funds have a sound investment strategy that is in the best interest of their members?
- Operational management Do pension funds have their administration in order? Or do they have proper outsourcing arrangements in place with a third party?
- Board members We assess the fitness and propriety of pension funds’ board members – they need our approval before they can be officially appointed as such.
Pension system review
Our pension system will change in the next few years. In June 2019, the government, employees’ organisations and employers' organisations reached agreement on pensions and the AOW. For example the AOW retirement age will continue to rise, but at a slower rate. The second pillar – employment-related pensions – will be structured along more flexible and personal lines. The outlines of the new system will gradually become clear, as many of the arrangements from the pension agreement are currently being fleshed out. More information on the Pension Accord can be found on the Dutch government website (in Dutch only).